kernen. joe mentioned earnings reports last night from alcoa and yum. costco already out this morning with better than expected results. there's also news expected on chevron, fedex, toyota, microsoft, and best buy among others. we will have all those stories covered. plus, housing is going to be in focus today. it is a key component to the u.s. economic recovery. our guest host this morning understands this well. richard lefrak will be joining us in the next hour. also, we are continuing our week long series, what's working now. dan fuss is going to talk to us about where he's making money in the fixed income world right now. he's got a great record. i believe it's better than 10% over the last 20 years that he's been averaging. also it was a tweet heard around the world. jack welch questioning the jobs report last friday. today he is using a few more than 140 characters to explain. we're going to talk about his op

ed. at 8:00 a.m., jack will be calling into the show to talk about things. all of that coming up. on the lighter side of things, we'll be talking sports. in baseball, the playoffs last night. the a's beating the tigers 2-0. detroit now leads the series 2-1. the reds lost 2-1, but cincinnati still leads the series two games to one. we'll have more in squawk sports at 6:20 eastern. that's a good one i was watching. the next hour, we'll talk about golf. rhys jones is our guest host. he designs courses. andrew, good morning. >> thank you, becky. let's talk about earnings, starting with alco waalcoa. stronger demand for aluminum

products, from airplanes and automobile producers. this offset weak aluminum prices and worries about china's slumping economy and that's probably the bigger and more important piece of all of this. the ceo cautioning that the company's noticed a slight slowdown in some regions and end markets, namely china, lowering those expectations by a percent across the board. let's talk about where shares of alcoa are going. they have risen, though, in after hours. the company is raising its four-year outlook after sales held up despite cooling economic growth, shares rising on the news after the bell. and early this morning, costco out with its results. the warehouse operator's earnings and sales beat estimates, joe, so are you a costco -- >> never been. >> never been to costco? >> i don't shop, though, andrew. you've been? you need a truck to bring your

toilet paper snohome? >> you've been to walmart? >> i've been to walmart a couple times. >> i'm not a huge shopper. >> jim cramer is a huge costco fans. they have all kinds of scavenger hunts you can go on to find all kinds of good deals. out with better than expected earnings. >> every quarter since its first, you always see the financial press say oh, it still matters. i have yet to see a quarter where -- >> actually, this quarter i think matters more. >> china is interesting, but it's benign. >> but after word from the imf bank -- >> but they did lose money. back out the settlement they had with bahrain. in global market news, china's central bank governor will not leave the chinese delegation at the semiannual imf meeting in tokyo this week. the decision is a snub to the host country japan. the skipped meeting follows a deterioration in the relations

between china and japan over their competing claims to some islands in the east china sea. the fight has been marked by violent protests and calls for boycotts of japanese products in china. other news on china, a u.s. congressional panel will probe a new wave of complaints against waway, and zte urged american companies to stop doing business with the chinese telecomequipment makers. that has triggered a fresh wave of complaints and they have been receiving calls from current and former employees and customers that are reporting supposedly suspicious equipment. >> we heard that from carly, who said she was convinced that they had stolen intellectual property. that was her complaint. is probably hearing about this, you probably got a rash of complaints that people stood up and said yes, we've seen similar behavior. let's take a look at the markets the morning. yesterday was another down day

for the markets. did see the dow down pretty sharply. nasdaq off by seven and a half. the s&p futures are lower as well. in europe at this hour, you'll see that similar trend -- not significant red arrows, but in france, the cac off by about 12 points. in germany, the dax down about 27 points as well. overnight in asia, you can see that -- modest declines for the most part. the shanghai composite did host a slight gain. in japan, the nikkei was down by almost 2%, a 173-point drop. oil price were the huge story yesterday. you did see a surge in crude oil prices for a couple of reasons. one of which is syria and turkey. syrian shelling, turkey for six consecutive days. nato saying it is going to drop

plans to defend turkey if it's needed. you also heard that benjamin netanyahu called for early elections there, and all of these things are focusing the issues in the middle east. you see this morning, it's pulled back down, west texas intermediary crude from 61 cents. brent is down by 55 cents. saudi arabia making a bunch of comments about how he thinks it should be $100 so. saudi is stepping back in saying they will pump more. take a look at the ten-year note. at this hour, it is yielding 1.727%. the dollar -- let's flip the boards. the dollar is stronger across the board. dollar also stronger against the swiss franc. gold prices this morning have seen -- they barely budged, actually. >> just reading more on this

waway story. ibm. there have been some crucial allies. that's just scary. they help them. you combine that computer on jeopardy, watson, whatever the name was, and you combine that with working with waway. i'm just wondering what all that means. >> empire -- >> you've got rise of the machine. an intelligent computer here, watson, which just decimated the human -- and then you've got china here involved with waway stealing secrets. not watson then. the other one. the one that was on jeopardy. beat the smartest guys. >> i think is there more to this than just waway, ibm, watson.

you don't want the chinese to get -- the other thing we're talking about today is jack welch penning an op ed following his now famous post jobs report tweet. this morning he writes i doubt that many of us know any business people who believe that the economy is growing at breakneck speed enough to lower, basically to go down a half a point in two months with anemic growth. as it would have to be for unemployment to have to drop to 7.8 from 8.3 over the course of two months. as for rather he regrets his tweet, i'll ask that. he says if i could write that tweet again, i would have added a few question marks at the end. as with my earlier tweet to make it clear i was raising a question. but the night before he had written we'll see if it goes below eight. i said it might go all the way down to 4.9 if they took the

participation right down to 40%. he goes on to say but i'm not sorry for the heated debate that ensued. i'm not the first person to question the government numbers and hopefully i won't be the last. and he references someone who's criticized him a lot, which is rich austin golsby, our guest friday morning after the jobs report. jack mentioned a op ed in "the new york times" back in 2003, and in that piece, goolsbee spells it out. in other words, the government has cooked the books. when people serve manager the military were classified from not in the labor force to employed in order to reduce the unemployment rate. nonetheless, the impact has been the same. he was making the point that there was a jobless recovery that came later because they had notless the unemployment rate rise to the level where it would have been normally. and jack is going to join us at

8:00 eastern. the people that we've had have talked about jack have just pointed out, look, it's at 7.8 for whatever reason. you've got part-time workers. all these census workers call people and find out whether they're working. if you've done anything in the last month, you could theoretically call them part-time. >> if you've worked an hour. >> if you've worked an hour, you can claim that it was part-time. the government hired more people in the previous two months, where we did see it come down a half a percent, than since 1948. i think the point they're making is you can say 7.8 and say wow things are getting better, but in reality, it's probably not a good picture. >> voters themselves look at the economy and figure here's my take on the economy.

>> what i love is the feigned -- oh, questioning the government! you're allowed to say that bush lied and people died? the only time that government lies is to start an unjust war? >> this is a debate that you can only lose. >> but is that the only time you can say the government lies is to start a war? >> no. i think you say the government lies about all sorts of things. >> but not the bls. >> you say politicians lie. >> but not the labor department. >> austin goolsbee, was it manipulated -- purposefully manipulated. and i think we should agree that it probably wasn't. >> wait a minute. >> goolsbee saying it was manipulated -- >> i'm saying he's wrong. >> i don't think goolsbee is i don't think as all. >> the past two months, the government has put a lot more people on the payroll. if you want to argue that that

is the government trying to manipulate by hiring people, that's probably a better argument. >> it was state and local -- >> that's why it's hard to argue. >> as jack said, question mark, question mark, question mark. >> these numbers have probably been massaged not just for the last two months. the way that the participation rate has slowly come down. i mean, there's a lot of different ways. >> i think it's a fair question to ask. the unemployment numbers have been wrong all along. >> but there's a difference between the number being wrong all the time, which is probably relatively likely. all you're really doing is looking at a trend line. >> there's got to be a margin of error. >> you're shocked that the government could be using it, or the party in power could be

using it. >> i think that austin goolsbee was wrong, and in this case, to the extent that we're arguing manipulation, i think it's a hard argument to make. >> we know china cooks all the books and we know chavez didn't win. >> that's because you told me the bls guys went down there to count the votes. >> i did tell you that. what do they call when jimmy carter goes someplace to watch the vote. the watchdog. the bls is down there monitoring. >> honestly, i don't think it was conspiracy. i question the number. i question the number regularly because i don't know how you get an accurate read the way they do it. but we're going to talk to jack later today. he can tell us a lot more about it. it is now time for the global markets report. ross westgate back by popular demand and standing by in london. ross, you've got some more red behind you. talking about red, front page of "the financial times" this morning saying here that your banks over there in europe, the ones -- i don't know what your local bank is there. >> my banks.

>> going to need about $4.5 trillion with a t, is that possible? that's what the imf is saying? >> yeah. about two trillion. there's a long way to go, particularly in the eurozone, andrew, before we get back to a sector that can actually start contributing to the economy. >> who has $2 trillion? >> sorry? >> who has $2 trillion to help them? >> well, exactly. yeah. so we're going to constrict loaning and where are you going the raise the money from? exactly. that's why it's going to be a drag. people who are originally talking it would take seven to ten years to cleanse the banking sector, and bear in mind in europe we only started 18 months ago properly, so that's why it's a long way to go still. if you think about it in those terms, right? >> you've got a lot to work with there. or not a lot to work with there. >> we have. not a lot to work with. which is why people are saying

that europe stays in a very -- if not in recession, almost zero grade for a long time because of that drag. at some point, those liabilities roll straight into our welfare and pension liabilities, and that's the big long-term focus facing europe. right now today, you can see right on the screen, slim losses. advances being outpaced by decline by around a ratio of 7-2, something along those parks. yesterday we were down a half percent to three quarters. jus under half percent for the ftse, dax. today is also deadline day to try and get a deal between eads and bae. this is what eads stock has done since september 12th when news broke that they were in discussions. it's fairly flat. the betting will be that that deadline is 5:00 london time, so noon eastern time. the betting is that the two companies will ask for an extension to the takeover panel for more time to try to get a

deal together, maybe two or three weeks might be the extension they ask for. it's very hard for governments to agree. we spoke to william hague this morning, who said look, what's key here as far as the uk government is concerned is the u.s. relationship remains intact. and that sort of is dependent on if it was going to be a deal, how much a share holder the french government may get, put off u.s. administration's having the same relationship with an enlarged group that they have now with bae systems. also the german government, are they prepared to be pushed down to the sidelines. so many questions. and shareholders, as we've heard this week, not particularly happy either about what it does for bae because they like it as a defense business that pays a nice dividend. spanish slightly high. also had a tea bill auction out of italy today. for the first time in a while, yields were slightly high on the three-month.

the 12-month yields, 1.94 from previously just under 1.7 in september. slightly higher auction yields for italy in the tea bill area. that's where we stand. some pretty low volume -- kind of waiting day, i'll put it like that. we'll wait to see what you guys get up to. but for now, back to you. >> okay, 00-ross, thank you. i read this a couple times. the obama campaign and supporters, including big wigs like david axelrod and robert gibbs along with several cable tv anchors. >> i think you know who -- ali has been tweeting. >> i doubt if that's andrew. >> would like you to believe that the bls -- that the data is handled like gold in fort knox, gun carrying guards watching their every move. highly trained white gloved super agents counting and

recounting each number. when in fact, there are 60,000 households that these census workers call on the phone, try to get a hold of them over a one-week period asking a list of questions and recording their responses. these are all government workers making the calls. in fact, in the handbook of methods of the bls, they talk about the possibility of subjectivity and bias creeping into it and to not really put too much stock in this. >> i think it's over a page in the bls handbook. >> considering that if you work either 34 hours a week or one hour a week, anywhere between one hour and 34, you could be employed. so if you got one babysitting job for an hour, that could be counted as employed. >> what's surprising is how people have gone after jack just for saying this. i had not seen this, but they make a point in the article of saying jack says i'm not a surrogate for romney campaign. my wife is not a surrogate and is not connected to the romney campaign. i guess she worked --

>> she consulted for bain. >> bain consulting, not bain capital. >> now they're calling it truthers. >> i was telling becky before the show -- and i'm on a lot of these e-mail lists. there's a whole group of people trying to spend all their day and night trying to discredit jack and his history and his this and that, as if that has anything to do with anything. >> it's gone crazy. >> completely and utterly out of control. we'll talk to jack about this. >> your morning sports report. plus, today's national weather forecast. we'll have that. i didn't even see it. i went to bed right after the eighth. >> i watched earlier. and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety. which can withstand over three and a half tons. when you take a closer look... ...at the best schools in the world...

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welcome back. take a look at u.s. equity futures at this hour. red arrows across the board. marginal, but worth keeping an eye on this morning. we also have some headlines for you. danaher selling apex tool group to bain capital, paying about $1.6 billion for the business, which makes a number of popular tools, including hand tools for the sears craftsman brand. any time people talk about bain these days, they think of romney, but he has nothing to do with this. >> i looked around for benghazi stuff on the cover of "new york times." >> and you're looking right at the bain story.

>> that movie really did cause the whole libya thing. we apologized to libyans for the movie -- >> it was 100% wrong. went on "meet the press." >> they got something about rom ne's message about trade. they're going back and looking at bain's china. >> owns an auto manufacturing outfit in china. how he has a piece of it and they're trying to make a case out of it. >> wants more money. >> any more progress on the tax issue? >> i don't. on the issue of benghazi, though it's unrelated, i told you this earlier. i saw the movie "argo" last night. it's coming out i think later this week. >> i say the previews. >> and it was fantastic. and given what's going on in the middle east and what's going on in the world today, if you have

an opportunity to see it, it is worth going for friday night dates. it's hardly a date movie. >> ben affleck directed this movie. >> ben affleck directed this movie. star of "gigli." >> you know, if you gave him a seen, i don't think he could -- >> the guy is brilliant. >> i just hope he runs for office someday. >> has nothing to do with politics. it's the hostage rescue in iran. it's a terrific story. and ben affleck -- look, he had a history with j-lo and all that, but he is, i think, a pretty bright guy. and by the way, did that other great movie. more recently, he directed another great movie. >> "pearl harbor"? >> no, not "pearl harbor." >> what's the one in boston? >> "maid in manhattan." >> no. >> i know which one you're

talking about. >> "the town." >> now to today's squawk sports report. the a's beat the tigers 2-0 last night. detroit leads the series two games to one. and the reds -- i watched the bottom of the eighth and that was it for me because i knew it was going to extra innings. the reds lost 2-1 to the giants, ten innings. homer bailey had a no-hitter all the way into the seventh inning. ten strikeouts. san francisco was hitless. but then it was a clean single the right, and two outs in the sixth. third baseman scott rolen's two-out error in the tenth -- and he's a golden glove normally -- helped the giants avoid a sweep. cincinnati does, however, lead the series two games to one. i will tell you. >> bailey looked good early. >> it entered my mind yesterday that if they won last night, i'd have to wait for next series and that if they lost, there would be a game on at 4:00 today.

a lot of times i like. >> as long as you win in the game. >> i like these things to go to the final game because it's so exciting. i don't really want this one to go to five. but if it does -- >> you're okay with that, as long as you get a little more out of it. let's get to today's national weather forecast. ray, welcome to "squawk box." how are? >> hey, i'm doing well. for tonight at yankee stadium, if you are heading out to the see the yanks, a 7:37 start. there may be some showers. the showers in the east, the next front coming into the north. that's going to bring some rain snow showers coming around. not expecting big delays. but still some, washington, d.c. seeing some delays. minneapolis, atlanta, san francisco. you all look good, as we're not expecting too much in the way of travel weather there, you are going to see the wet weather continuing to spread east as we head through the daytime hours today. >> all right, ray.

thank you very much. when we come back, the biggest auto recall over inn a decade. we have the details after this. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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♪ good morning, and welcome back to "squawk box" here on cnbc. making headlines, toyota announcing a massive recall of 7.4 million vehicles. that's globally, at least. the auto maker says it needs to mix malfunctioning power window switches, which don't sound

that -- it says they may emit smoke. no accidents, injuries, or deaths have been reported. it's the industry's biggest single recall since 1996. and that one, you might recall, was a ford problem. california refineries are close to starting production of that winter blend gasoline, even though they don't have win thor in california. the change comes two days after governor jerry brown authorized its sale to tame skyrocketing retail gasoline prices. >> it's not helping yet. the wholesale prices have been coming down on this news, but i think yesterday the average was $4.67 a gallon still for the state of california at the pump. >> let's talk about microsoft. microsoft ceo steve ballmer has signalled a new direction. he's pointing to hardware and online services as its future, taking a page from longtime rival apple.

he suggests microsoft may eventually build its new phones. >> that's a big shift. >> it's a huge shift for them to get into real hardware. they did make one of the -- i don't know if it was the surface or -- one of the prototypes for their tablet is manufactured by them. and it may be ultimately that you need to actually do the software. >> the software gets stolen by china and all these other places. they don't pay for it. so i guess you eventually want to shift to where -- >> i think that's part of it. but i think part of sit the seamless nature of what you're seeing by apple, and on some level by google, now that google owns motorola. i don't know if you saw this as well on ballmer. his income was published and he took a slight pay cut. he went from -- >> he's worth a billion dollars. >> but he was paid $1.4 million last year, or two years ago and

went down to $1.3. >> that's a job i would not take. i wouldn't know what to do with microsoft. is that really the answer, tablets and phones? i might put all my resources into quantum physics. you know that the chemistry prize was handed out today. it was not for what you would consider pure chemistry. it was for figuring out the structure of a cell receptor. so it's all coming back to what we're trying to do, these g protein cell receptors and the chemical composition and actual structure of this thing. but everything is coming to -- it's not just pure chemistry anymore. >> should have a daily science segment. >> this is the week of the nobel prize. >> bill nye the science guy. >> i'm looking forward to the nobel peace prize.

god know what is those guys will do this year. did you see that incredible girl in pakistan who kept going to school. you would think it would be -- not someone who goes to the academy awards that year, like al gore. he's picking up the nobel prize, also going to the academy awards. maybe somebody who couldn't go to the academy awards because they're in prison, a dissident somewhere might be a better one. they already gave one to obama. maybe he can get a second one, a peace prize. do you think? >> unlikely. the ftc -- >> has anyone ever won two? >> that i don't know. >> maybe arafat. >> he'll look it up. >> he won one. >> i know. that's why i was laughing. >> jimmy carter needs another one. built another house. go ahead. >> he doesn't have a role in "argo" but he's part of the story. >> maybe ben affleck. >> you think ben affleck? >> he hasn't won an oscar? or did he win one for "gigli"? >> what about "good will

hunting"? >> i think they won one for -- >> for the writing. >> let's talk about google. the ftc expanding their investigation into google's conduct with respect to smart phone patents, saying that the ftc has also asked apple and microsoft for information within the past few weeks. the government is interested in particular in how google licenses its patents out and sues companies it says are infridging on them. >> let's get a check on the markets. the futures are indicated slightly lower after the dow was down two days in a row. these are just slight moves. the dow down by about 14 points below fair value. in europe, you're seeing similar moves right now. down by eight points in france. down by 23 in london. the dax in germany down by about 20 points. asia, mostly red arrows. in korea, the kospi was down by over 1.5%. oil was a big story yesterday. continued tensions in the middle east through a variety of

sources. you had netanyahu saying he's going to be calling for early elections, that brings a lot of people into focus thinking about iran and what's happening there. you also have syria continuing to shell. turkey, they are looking at support from nato. crude oil prices are down about 48 cents after a big jump yesterday. the ten-year note, the yield has continued to move higher. the dollar is stronger across the board this morning. dollar/yen, 78.27. gold prices have barely budged overnight. you can see right now they are down about 80 cents. >> bill clinton would love to win one. and he's nominated. >> he is nominated. >> i'm just wondering, if they were trying -- i'm trying to figure out whether it would help or not. if the guys that do try to influence our elections over here, europe has better ideas for who should lead our country than we do, we think anyway.

>> i'm looking through the list. i don't see anybody mentioned twice yet. >> i don't think you can win twice. if it were bill clinton, does it help or hurt in the re-election of barack obama? i think it sort of help because he gave the big speech. but then again, you compare the two. i'm not sure -- they need to think carefully. if they're trying to help obama in the election, which the euro trust tries to do -- >> i think it's a nonstarter. >> want to rile the republican base up? >> i think a lot of people would look and say there was a president that -- >> mother teresa. >> there are some good ones. >> the dalai llama. >> did you see he gave a speech last night. >> who? >> clinton gave a speech last night about romney that was --s the like fighting words, which i had not heard. >> who? >> clinton last night.

really stepped it up in a whole different way. joining us now, john kingston. he covers oil for plats global. standing by, ben liechtenstein. what happened with oil? what's likely to happen near term? >> two things yesterday. you mentioned syria and turkey before. it's not just a general tensions thing. there was a port in turkey, it is on the mediterranean, it exports a lot of crude from saudi arabia, from iraq, from syria when they were producing more. there was a fear that port might get pulled into this whole mess and the pipeline is going there, could be affected. so that's on the bullish side. on the bearish side, ahead of the iea, maria vanderhoven, whose job is to tell the oil market is tight, so that the oil market is in fact well supplied. this does not happen. the head of the iea does not talk like this. i found this statement to be stunning. i think it actually does support what a lot of people have seen,

that opec production is well above what the world needs to keep inventories blnsy ies bala. that was a very bearish statement. the markets moved higher, and just the whole conflict spreading. >> ben liechtenstein. i think joe biden might be a good guy for the peace prize. what do you think? do you think he's nominated? the market sold off a little bit so far this week. what do you think that we ought to expect? has the s&p hit a near term resistance level because so many people say it's not justified, it's all bernanke? >> i don't think so yet, joe. there's a lot of weight on the market right now. one of the contributing factors is the oil. i wasn't even really thinking of that until your guest was discussing this probing process back towards that $100 a barrel level. most important, with the top trade that we've been seeing, i think you have to distance yourself and look at a little bit of a larger, bigger

timeframe and that's what i've been doing. if you do, there's somewhat of a concerning picture which is being painted. the technicals are extremely important at this point. we had a huge run-up in the first week and second week of september, and right now, we're starting to work our way back down and testing some of those lows from the beginning of september, and if you look at the russell, we've actually already breached the low from the second week of september and the low from the first week is around the 8:02 level. the nasdaq has been extremely weak. we've seen the nasdaq get below that low from the first week in september already. we like to look at that with. the nasdaq, the tech sector, we like to look at that. and both of those are pointing towards weakness. the only one that's really yet to kick in to the downside is the s&p is showing the 1433 level, up above that key level of support right now.

into that 1387 low, the low from the beginning of september. that's the level that we're looking at. the nasdaq has breached that low from set. >> i guess it depends on -- we've had expectations lowered. we know earnings are not going to be as good as they've been recently. >> but have we lowered them already enough to where we still beat lowered expectations and that doesn't cause that? anyway, gentlemen, thank you. something is coming up. coming up, we've got a fierce debate on wall street going on, and in washington. and now on the campaign trail. regulation, is it helping or hurting the u.s. economy? we'll ask a high ranking republican congresswoman after the break. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time.

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welcome back to "squawk box." higher capital requirements imposed by regulators are costing small banks big. our next guest says this is stifling lending. congressman shelly moore is here, she chairs the subcommittee on financial institutions and consumer credit. good morning. >> good morning. >> thank you for being here. >> sure. >> how big a problem is this in terms of how we're thinking about small banks and how their capitalized versus big banks, like a citigroup or jp morgan or bank of america? >> well, small banks don't have the resources, so the complexity of trying to comply with the capital requirements is an issue for community banks. i have actually the head of the community bankers is a bank foreign minister my area, real small area. so he doesn't have the compliance officer. he doesn't have the flexibility in his capital to be able to meet these requirements and that's an issue. then he won't be lending in a

local community, which is where a lot of rural americans, small town america really relies on getting businesses going. >> but here's the big question. after the financial crisis, we say we want all of our banks to have more capital. we need a rainy day fund. they need to have a cushion. when you look at the banks that have failed and failed in large number, and let's take a big banks out of it because the government helped them in a big way, but the ones that have not been able to take their tarp money back, they are the smaller banks is. there an argument to be made -- not that they need to be more capitalized in the bigger banks, but that keeping them at similar levels is actually the right thing on a long-term basis? >> i think they are capitalized with more capital right now. i think that has improved because of what happened in 2008. but they weren't the source of the problem. what you're going to have here is if the smaller institutions, community banks can't meet these capital requirements, what are they going to do? they're going to merge and acquire one another and create bigger banks. and so then we're back in the same revolving door of fewer

banks holding larger assets. and then i think you lose the flexibility that you really need that you get with the community. >> are you a believer we should break up the big banks? >> not really, no. i think in order for our bigger banks to compete globally they need to be large and multi-faceted. >> a story on the front page of "the wall street journal" today is how the government is suing wells fargo for faulty mortgages, they say. they say that they were lending recklessly to fha borrowers and left the government on the line to deal with all the defaults that came down the road. my concern about a story like this is what happens to people who are trying to get a mortgage down the road with an fha where they only have to put down 3.5%, 5%, 10%? >> you have to realize, fha now they're under capitalized. their ratios are low. they were in danger of having to come to the government for a $700 billion bailout last year.

and so -- >> which they avoided by suing a lot of the big lenders. but will they turn around and refuse -- >> i think you endanger the people on the bubble. the people that have the high credit stores and enough to bring hefty down payments, they'll always be able to get their house. it's the people in the middle that will be harmed if fha is not there for them, or if the banks in a disqualified mortgage -- this was brought up in the debate, i was like yeah, i know what he's talking about there! a disqualified mortgage is too narrowly defined, you're going to knock those people out of the mortgage market and further seize up the housing market. >> in the case of wells fargo in particular, they're the biggest of the lenders. 11% of all the mortgages in this program came through wells fargo in the last couple years. their default rate was lower than they were for the general

population of these loans. so you're not talking about somebody who was handing money to anybody and everybody and had a huge default rate as a result. >> in reading the article this morning, my question is what kind of violations are we talking about here? are we talking about you have the wrong expiration date? or is it when you're absolutely gouging -- >> remember, it goes beyond wachovia as well. do you remember who was really involved with that? golden west. >> there's a bigger argument around golden west that's very complicated about whether they were actually responsible for the loans or actually once golden west was taken over by wachovia whether some of those things happened. there is a debate -- >> what were their names? >> the sandler family. >> are they friends of yours or something? >> no, but i've looked at this extensively. there was a great debate. >> ken lewis was the guy.

or ken thompson. and he's supposedly called it a home run and it turned into a horrific out. into a horrific o where, you know -- >> we were talking before the show about the idea that this was a wachovia deal. . >> yeah, by hands that feed. >> citigroup by sheila bair. >> wells did us a favor, didn't they? >> wells helped us. >> right. >> exactly like last week. does that make sense to you? >> i'm not sure how you can be held accountable for behavior for institutions that you really had no regulatory authority over. you didn't own, they weren't part of your business. >> they just want a couple hundred million. >> take -- >> right. >> help us. >> just it's a shake down, get couple hundred million dollars, right? >> well, you know, i think so, and i think it's, you know, it's got the desired effect, it's a front page. >> right. exactly. >> doesn't that go to this issue. to the extent that your constituents look at this. does it help -- to the extent

the american psyche, the american public wants to see this, does this help the cause? >> well, you know, honestly, i think it does. you know, i'm looking at things through a political eye shade in a lot of cases. and i think having the bigger banks being held accountable. >> helps the obama administration too. >> well, definitely a political win in that sense. been begging for someone to walk out. >> none of this is what i think people really care or know about and when they look at the details, they don't understand it well enough. eventually that's the cheaper way to go. >> we know that they would never do anything, you know, deliberately to try and get reelected. >> you want to get the congresswoman? >> no, no. never do that. not to the chicago guys. in the old days, remember the kennedy -- used to buy votes and unions. >> he said he didn't want his father to buy a landslide.

>> in west virginia. >> in west virginia. >> yes. >> that's where i'm from. >> in the '60s, you did it the right way. not all this subterfuge. >> congresswoman, thank you very much. >> thank you very much. when we come back, could one senator push the u.s. over the fiscal cliff? we have a comment you can't afford to miss right after this. maybe new buildings? what about updated equipment? they can help, but recent research shows... ...nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this.

is strangling our economic growth in the long-term.

we must seek to control the rise in income inequality. the 1986 model would be ineffective if not counterproductive to solving these two challenges. >> that was senator chuck schumer speaking at the national press club yesterday. and the comments may sound innocuous enough, but it kicked off a bit of a fire storm because he is coming out and throwing a wrench into things happening behind scenes trying to find some solution for the fiscal cliff. you've got the gang of eight in the senate and senator mark warner working with that gang of eight trying to come up with solutions. schumer came out and threw a hand grenade in the middle of the whole discussion. we'll have more about this a little later this morning. plus, we're going to be talking about a reality check on the state of housing and the u.s. economy with our guest host richard lefrak. he owns more than 400 buildings in the new york area and joins us after this. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong.

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from oil to residential and retail properties, real estate mogul richard lefrak got a hand in what makes the economy tick. our guest host this morning. a strategy session on the next investment plays in china. get the names for your portfolio only here. and meet the man they call the open doctor. one of the top golf course architects in the world is here to talk about the business of golf as the second hour of "squawk box" tees off right now. ♪ welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernan and andrew ross-sorkin.

in the green room this morning, we have richard lefrak. he's the president of the lefrak organization, he has his own theme song. also coming up at 7:30 eastern time, the company challenge, companies like yum brands, the world's most populated country, we'll tell you which companies have exposure there and whether or not those names should be in your portfolio. also coming up, reese jones, we'll talk real estate and the business of designing world winning courses. and new york jets owner and romney supporter woody johnson will be here to talk business. >> thank you, becky. let's take a quick look at futures. we have some red arrows, dow would open up about 6 1/2 points lower, s&p and nasdaq off, as well. earnings season, kicked off with alcoa, earning 3 cents per share for the third quarter compared

to expectations of a break even quarter. the company saying the aluminum market's fundamentals are strong, but worth noting that the situation in china is slowing down by at least 1%. and that came after those reports from the imf also suggesting a slowdown. yum brands earned 99 cents per share for the third quarter, two cents above estimates. a parent of taco bell, pizza hut and kfc. raising its full-year forecast. yum did say its results were being held back by slower growth in china, as well. so we've got a china slowdown across the board. the china slowdown and what it means for your money coming up at the bottom of the hour. >> kfc. >> huge in china. and bain capital is in the news today having nothing to do with politics or mitt romney, buying for $1.6 million from the current owners. apex makes, of course, hand tools for the sears craftsman brand. i shouldn't say of course as if i know. >> those are famous tools.

>> the tools are famous as well as luskin measuring tapes and crescent wrenches. you have any of those at home? >> no, but i've heard of a crescent wrench. >> china's central bank ministers won't be attending the annual meetings in tokyo this week. it is a snub that's what people are talking about. it's a snub to japan and it comes as the two countries remain at odds over a cluster of islands. was scheduled to give the closing speech on sunday. the dispute over the uninhabited islands in the china sea triggering protest and having an economic impact, as well, with sales of japanese cars and china plunging. the spillover threat is threatening a shaky effect in japan. toyota is recalling about 7 1/2 million vehicles in the united states, japan, europe, and elsewhere because of faulty power window switches. the recall affects over a dozen

models that were produced from 2005 to 2010. the power window switch on the driver side didn't have grease applied evenly during production. and sometimes can cause smoke. no injuries, no crashes have been reported as a result, but models in north america that have been recalled include the carola, and scion models xb and xd. it's time for a check on the markets overseas, and ross westgate, an encore performance from london is joining us. good to see you twice in one morning. >> you lucky, lucky people. not quite at the session lows right now. advances being outpaced. by around about 7-2, we have losses yesterday between .75%. not quite at those levels today as we wait for the u.s. open a little bit later.

nevertheless, we are down as we move on. up .4%, the epex around 2/3. whether or not they can announce a deal between this big mega defense airline merger. since then, the stock has been down, it's slightly higher today. the betting is that they will have to ask for an extension, maybe two, three weeks something like that because they haven't been able to agree. remember, the problem is we've got these government shareholders, the british uk, british government and bae, and the eads who all wants slightly different things. we heard today from the foreign secretary william haig who explains the u.s. strategy in bae and that aligns, as well. if there was anything to dilute that in the merger, they wouldn't support it either. we've already heard it this

week, over 13% of the private share holding. that they are opposed to the deal on current terms, particularly worried about solution. they also get quite a nice free cash flow from bae and a nice dividend. they're worried about that being diluted. and they don't see the logic necessarily. there's a lot of hurridles. and very quickly, we have an auction out for italy out this morning. yield does go slightly higher on the three and 12 months. slightly higher yields for italy, in the cash market, 5%, and spain, they've come back down to 5.78%, well below 6%. that's where we stand. back to you guys. >> ross, do you see this nigel dude from yesterday, the guy from the uk. >> he's fantastic. >> nigel ferad. >> very outspoken, yeah. >> he's great. >> yeah, he's good tv.

he's very good tv. and i don't know -- he got slapped down in the european parliament for being overtly sort of aggressive and name calling. >> he had to pay a fine of $5,000, i think. said it was an expensive speech. >> yeah, if he keeps doing that, he on his own could sort of become a one way to repay back the debt. >> if he gave speeches like that 68 million times, he could repay it all. >> exactly. and so, yeah. >> and there was a sort of a following, some following for him. >> he seems like a little bit right wing for you and a lot of your friends over there. does he -- i like what he says about the eu, though. he doesn't pull any -- you didn't join the current. you made the right move. you don't have to feel uncomfortable when he tells it like it is about the -- >> no, no, no, and look, we've got david cameron the prime minister speaking right now at

the conference. and we do expect him to suggest in the speech that the 2015 election, which is coming up, that position the conservatives will campaign on a basis of repatriating powers back from the eu. so this, you know, whatever happens as the euro zone gets closer, the uk is probably going to have to renegotiate its position within the eu, because at the moment, no one in this country wants to join the euro. everyone else in the eu has this theoretical pass toward the membership. the architectures and the relationships will at some point have to be renegotiated probably. >> kicking and screaming more like it. thank you very much. we'll see you again tomorrow. back here in the united states, we are still talking about that jobs report from last friday. jack welch pinning an op-ed in today's "wall street journal" following his famous post on that jobs report. this morning, he writes in part, i doubt many of us know any business person who believes the economy is growing at breakneck speed as it would have to be for

the unemployment to drop to 7.8% from 8.2%. as to whether he regrets his tweet. he said i would have added a few question marks at the end as if with my earlier tweet the one he wrote the night before to make it clear i was raising a question, the whole talk whether or not the chicago politicians were behind this. but i'm not sorry for the heated debate that ensued. i'm not the first one to question government numbers and hopefully i won't be the last. he references austan goolsbee. our guest on friday morning after the jobs report. he has been critical of jack for questioning these numbers. and jack mentions goolsbee in his op-ed in the "new york times" back in 2003. austan in that piece wrote in part, in other words, the government has cooked the books, it has been a more subtle manipulation than the one during the reagan administration when people serving in the administration were reclassified from not in the labor force to employed in order to reduce the

unemployment rate. nonetheless, the impact has been the same. goes to show that people question government numbers pretty frequently. >> i wonder when someone -- because he was on and pretty strident about criticizing jack. i wonder if someone said, austan, 2003, i wonder if he went -- didn't remember. oh, no, that's right. i wish -- oh, boy, do i look stupid? >> austan was tweeting yesterday. we've got to get him back on. >> doh, is a universal language? >> very simpsonian. you can follow us on twitter @cnbc is our handle. real estate mogul and entrepreneur richard lefrak the president of the lefrak organization. good morning, richard. we're going to talk politics, housing, the economy, and much

more, "squawk" will be right back.

we're back this morning.

let's welcome our guest host. we talked about him, i think of him as the other mayor of new york. richard lefrak joins us now. mr. real estate himself. we can talk about politics, we can talk about jack welch's op-ed. i want to start with taxes, that's something i think is on your mind. >> it is. >> and a view that taxes on the upper -- the upper classes, if you will, are going to go up no matter who wins. >> absolutely. that's exactly how i feel. and i think the cat we've let out of the bag a little bit in romney's last appearance when he said -- when he was confronted about lowering taxes. >> don't expect him. >> yeah, he says i don't expect to lower taxes on the top earners in the country. and i think that's a clue in my mind as to kind of where they're going to go, which is he may not

raise the rate on the upper end -- upper income, but i think there are going to be some limitation on the deductions that you can -- >> well, when everybody was saying it's going to be -- obama said that probably ten times. every time he said, no, it's not, yes, it is. he was answering the question as to whether the progressivety of the tax code would be maintained. he was saying net, net even if i did lower across the board, i will make sure the high end will not pay any less. whether they get their marginal rates lowered or not is a different story. they'll lose so much by not having deductions and people calling loopholes, they'll lose so much there they'll at least pay as much as they're paying now. you're saying you don't think -- you won't follow through on the 20% cut in everybody's marginal rates? you're saying he won't do that? >> i'm saying that at the end of the day that whether -- however they fashion it -- >> your effective tax rate --

>> your effective -- no, my effective tax rate will go up. it will go up because either they will raise the rate under the obama formulation. >> right. >> or lose deduction of the deductions will be equal to or more than -- >> but you are the guys that buffett is talking about. >> no, i'm not the guy buffett is talking about. >> you're a kazillionare. >> i am a high-margin tax rate. >> you don't have carried interest? >> i don't have carried interest. >> hold on. >> i am a super high-margin taxpayer. i pay tax at the high margin. >> above 30%? >> 30%. >> way above. i am a high-margin taxpayer. so my -- my thinking as a result of listening to romney's debate

and listening, reading some of the newspaper articles that have come out. >> why aren't you more dividends and capital gains? >> i'm -- i run a partnership. >> ordinary income. >> it's all ordinary income. >> partnership accounting, i thought part of the carried interest issue didn't just apply to private equity but applied to real estate, oil and gas, venture capital. >> you're saying that i'm able to characterize my ordinary income as capital gains? the answer is i'm not. no, i'm -- i own real estate, i get income from the real estate, that real estate flows from my personal return. i'm a high-margin taxpayer. >> i think that's good. >> i'm not complaining about it. >> you couldn't do carried interest even if you wanted to. not for the income coming in from the rents that -- >> well, you can have carried interest if you're in a real estate partnership in which there's a carried interest. i don't have -- i don't have a

carried interest because i don't have partners that -- >> you're not complaining about it. >> no, i'm totally not complaining about the current tax rate being a high-margin taxpayer. what i'm suggesting is that in the next go around that high-margin taxpayers are going to get punished under either. >> at least it brings everybody else in your income bracket into the same payment where maybe your taxes don't go up ginormously, but everyone else in your bracket who has been taking capital gains. >> well, i'd like to put it this way. capital has been convicted but has not been sentenced yet. it's going to be sentenced. >> you don't have a problem with capital gains taxes going up and dividend taxes going up? >> no, i think there are -- i think they -- if they done go up in moderation that capital formation in the united states will change dramatically. >> it could be hurt if it goes up too much? >> well, that's why i was

referring to the column because andrew wrote a column in which he was very insightful about the fact that, you know, it's a good time to buy high-end real estate in paris because everybody who lives there is running out the door. >> right. >> and by the way, there are implications in turn in the united states about the way this construct is going. because if you think about it for a minute, high tax states like new york, new jersey, connecticut, that's a lifestyle choice. >> right. people can like europe and say i'm going to london, i'm not paying these things, people can come and move out of new york. >> go to a different state. >> u.s. versus the rest of the world statement. i got a number of e-mails that said, and i think i mentioned in the column, if you move to paris, it's easy to decide you're going to move to london. that's like moving from new york to chicago, if you want to leave the country. >> you can't leave the country.

>> it's a lot tougher. >> you can't leave the country because you've got an exit tax and i'm not suggesting that's anything -- >> no, but we should extrapolate that what we see certain states do which causes a flight of capital and flight of business, we should see when it happens there and be senator enough to realize if the federal government does it, it could be negative. >> which was so surprising. about senator schumer's speech yesterday. >> yeah. this is a frightening thing. >> he's basically telling you -- well, i like to characterize it as a full employment palm beach. >> but to go back on what chuck schumer said, he said we should take and instead of lowering the tax rates, we should close all these loopholes and take that and take all the money and put it toward the deficit. now, there could be an argument for that, but i think the dangerous thing about him saying it is going and saying it to the national press club instead of being serious and working with the gang of eight and mark

warner trying to reach some sort of agreement that you can bring both sides of the aisle to. going out there and saying stuff like that. it's incendiary. >> by the way -- >> are you trying to blame him for that? was there a camera? >> i just want to understand one thing, we clearly know that under obama, tax rates are going to go up at the top. >> obama care they are. >> well -- >> you think there's a misunderstanding among either romney supporters or a misunderstanding about romney's position on this issue? >> romney told everybody in the debate. he said if you're an upper income player, don't expect you're getting any help this time around. he said it. >> do you think people six months ago thought they were getting help? >> i think that was in their wheel house. >> but then they misunderstood because he always said the

progressivity would maintain. he would lower rates, but the deductions would keep it at the same amount they would pay. >> i think that what i don't think people are thinking about is that if he keeps the rate the same, right. >> right. >> and he reduces the deduction to state income tax that has a very serious effect on certain high-tax states like new york, like new jersey, like connecticut, like california. illinois. >> right. >> i'm on record -- >> those states were blue last time i checked. >> i'm very high-margin tax rate -- >> we all pay above 30%. >> what are you? >> carried interest, my friend. >> is that what you got with that deal book? >> how else do you think i'm financing this lifestyle? come on. >> so many ways. >> richard lefrak -- >> i'm okay with these high-margin rates too. that's okay. i think wealthy people should

pay taxes. >> i'm not okay with -- >> not okay with 75. >> the confusion is killing us. >> "squawk" will be back after this. richard's with us for the rest of the program. the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.

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welcome back to "squawk box," everybody. the comeback kids staying alive. the oakland a's avoid elimination by beating the tigers 2-0. detroit leads the series 2-1. matt scherzer will try to close out the series tonight against griffin. and in the national league, the giants taking advantage of a pass fall -- >> believe me, the size of the baseball, you try to pass one of those, that's like a kidney stone. >> and the tenth inning for a 2- 1 victory over the reds. and the reds have not decided whether to let donny to take the mound. >> that's a problem because, that was what they talked about a lot last night. if you bring up a guy on to the roster and take him down, he's not eligible for the n.l. championship series. so they really needed to win last night. but at this point, these two bay area teams are hanging by -- no,

he's a 19-game winner. we've got to go. >> when we return, we're going to talk about china, and we've got a guy who makes golf courses. >> you know who his father was? >> on the show. >> no, i don't. rees jones. >> robert trent jones. >> we have all that coming up when "squawk" returns. what kind of car did "squawk's" founding anchor the late great mark haines drive? log on to facebook and like the "squawk box" fan page to find out. we're posting classic moments all week long. receive updates and post your comments about the show. "squawk box" on cnbc and on facebook. is morning, i'm going o trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan.

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welcome back to "squawk box," everybody. in our headlines this morning, mortgage applications fell by 1.2% last week. that's according to new figures by the mortgage bankers association.

by the way, the average 30-year mortgage rate edged higher to 3.56%, that's the first increase in seven weeks. excuse me. boeing is on track to achieve target for the liner. they should reach the goal next month, that comes after a series of production delays. tens of thousands of drivers may be driving cars with counterfeit air bags. car owners are being advised to check the website, safecar.gov to see if counterfeit air bags have been made for their particular model. the warning is aimed at consumers with air bags replaced over the last three years by a repair shop. any time a major golf course needs a facelift among other things, they call our next guest whose nickname is the open doctor. rees jones joins us now. obviously there was robert trent sr. was your dad and you have

after brother, robert trent jr. and robert trent sr. is an incredible legendary, and you're almost there in terms of golf courses. >> well, i followed in his footsteps. he was the open doctor before i was and i've been doing the major championship redos since he stopped doing them. >> you've had a bigger job, haven't you? >> yeah, it's tougher. now, and the game has changed so much, the equipment has changed. the length of the courses, they're making them more demanding. >> the equipment and also the players. >> the players are much more fit, they've practiced more. >> you look at tiger and the way he came up and what he looks like now. he's a physical specimen. all those guys are. and on tv, they don't look as tall. mickelson is an animal, he's 6'4", he's huge. >> right. >> and i look at some of the stuff you have to do because there's nothing that the usga dreads more than a 20 under u.s. open. you've got to get it so that par

is a good course and it's almost impossible for these guys. >> we did it at bethpage, this week at medina, it was match play, they let the ball fly. >> you were supposed to design it so maybe our guys had an advantage and it looked that way for the first two days. >> i thought i did. >> what the hell happened? >> well, i think it's called tension under pressure. >> oh, my god. you know what else it is, though? whenever i hear -- and it's true, there's no doubt any of those guys could've made a difference. and then you throw in justin rose. people don't hit putts like that. you see the chip that phil missed that allowed justin to win 17? >> if i hadn't put that green down on the pond several years ago, we would've won. >> are you doing something for marion? >> i'm doing hazelton, working on the pga and bebelriv also.

>> they've got to move the putting green to make room for moving a tee back 100 yards. and par fours that are 520, it goes from a par 72 to a par 70. >> well, they hit a 300, 350 yards now, it is a par four for the pros. >> it's incredible. >> what's the most difficult task you've had to do? where is the toughest club? an older one where you're edged in and can't expand? >> well, i think probably tory pines. we had a chance to do the course over and over. to get the open, at congressional we had to do it over to get the open. bethpage, i had to restore the old golf course, and it's been a tremendous success. that's the first time the usga brought the public offer really into their championship rotation. >> do you play your own courses? >> i do. >> how do you do? >> well, we open bethpage, and

determine the opening day. so i remind people of that. >> see, i think your father bobby jones was so good because he was designing all the courses, right? >> no, bobby jones is not my father. >> different guy! i knew that. it would have been easy to be good if he designed the courses. >> do you think the fact these golf courses are getting harder and longer? discourage people from participating in the sport. what's being -- that being addressed? >> well, the courses that i get ready for major championship can be transitioned back to the average golfer by cutting the rough down by slowing down the greens and then playing the forward tees. and a lot of those players can't reach the bunkers i put in for the better players. if you design them to be transitioned and have multiple tees, you're okay. >> fortunately from the forward tees -- and you're able to reach the bunkers that you put in for the back tees. >> well, move back.

there are people, and we can talk about the popularity. it's waned a little bit in recent years. then people come up with the crazy ideas. where you get mullagains. >> i would appreciate that. >> we'll never let that happen, will we, richard? >> well, it has waned, it's slowed down a bit. we have about 26.7 billion participants. >> and you see all the commercials now where they've got a couple -- and even it's a couple, they're sitting on their couch and saying -- and the guy looks old and fat and then the minute they go out on the course, he's wearing a polo shirt. it's pretty good marketing and they look like they're having a good time. there is -- i think the golf industry's trying to do that now. >> well, we're getting young people in the game. it's country club, we redo the whole golf course and a whole slew of young people. that's what we've got to do.

get them away from their computers. >> what do you do to that course. >> more open entrances, style, bunkers far away from the greens, greens are receptive, a little more passive. >> isn't it a time factor too for young people? if they have a young family, they don't want to spend five, six hours when they have other obligations. how can you deal with that? >> the first tee program run by the usga and pga is bringing like 6.5 million kids into the game. east lake is a great example. what they've done with the kids and now sending them off to college and playing on college golf teams. >> i don't think the sport, at least, is a spectator sport is not waning not after the ryder cup. >> i was there and it was incredible. the number of people during the practice rounds, they said there was 40,000, had to be more than that. they said there was 50,000 on sunday. and the merchandise tent sold out. the only thing left at the end of the week were the shelves.

>> i'm going to whisper to you, and don't tell anyone else, but i think it's good that -- >> for the game and because next time we are going to be so hyped up. that was humiliating, that was horrific. these guys will never get over that. >> we did it to them. >> right. i'm saying it's good. it was awful to watch. it was a slow motion train wreck. >> was the euro improved after -- did that go up? >> greece in default and what happened? >> the ratings were higher. >> that's what i'm talking about. >> and the europeans winning is going to help world golf because golf's expanding around the world. >> it's our tour that is the tour here in the united states. the best golfers in the world play here, most of them, so when they come over and beat us, even though we're the best tour, it's just a tumble. >> i just don't have any time to learn how to play. i do have clubs. some day. some day. >> right. >> make the hole bigger.

>> i'm up at the women tees. >> that's a good idea. >> you play at the women tees? >> i have to. >> good. i'll play with you. stocks on the move this morning including yum and alcoa. and then, more sports talk although we will talk politics with woody johnson is our special guest. he joins us at the top of the hour. stick around, we'll be right back after this break. we use this board to compare car insurance rates side by side so you get the same coverage, often for less. that's one smart board. what else does it do, reverse gravity? [ laughs ] [ laughs ] [ whooshing ] tell me about it. why am i not going anywhere? you don't believe hard enough. a smarter way to shop around. now that's progressive. call or click today. [ grunting ]

welcome back, everybody, we've been watching the futures and they're under pressure. right now, things are not as bad as they have been earlier. dow futures down by ten points. s&p futures down marginally, as well. we are a few hours away from a crucial deadline of bae systems and airbus parent eabs, the sides have until noon to ask for an extension. they can only do so if there's been significant progress in this point. leaders of britain and france are said to have agreed on broad terms for the transaction, but germany is reportedly still opposed. the three governments would all have shares in the merged company.

well, let's take a look at some stocks to watch this morning. start with yum brands. yum -- i was looking something up on my computer. because they earned 99 cents. that was 2 cents ahead of expectations. and that was about -- i wanted to see what last year was. so continuing to go pretty nicely. 83 cents was the year ago figure. so for the full year, looking for 327 versus 287. the company is growing in spite of a little bit of a slow down in the growth rate, i guess, in china. revenue was slightly below expectations, 3.57 billion versus 3.66. and the guidance is at least 3 pn 24, which is, as i said, down the street is looking for 3.27. it's basically in line. alcoa reported a loss, but if you take out items, they reported 3 cents a share and the estimate was for break even. revenue was above and the

company sees global aluminum demand 6% growth in 2012. home depot was downgraded from based on price. viacom from underperform to market perform, the target stays 50. so that means the analyst was looking for 50, now it's at 55. so he's actually -- i guess he -- maybe he had a buy and maybe got to his target, now it's above his target, now he's going to an underperform. the target remains at 50. tyco neutral from outperforming, crest suisse, maybe a spinoff or something. >> what is that? >> i think it's right. probably the company is a

spinoff. what i like is the target price was increased by credit suisse to $30. the old target was $29.48. so they're so good at credit suisse they no longer think $29.48, they now think 30. there's another 52 cents the analyst think is likely in terms of stock price. z zynga downgraded to neutral, the target is $3. denim maker true religion apparel said it was evaluating strategic alternatives which could include a possible sale of the company. never have understood, you know, these companies design a pair of jeans that cost like $400. how does that work? just because you want to -- >> a lot more every minute. >> denim or something, right? i don't know why that is. >> what was the only level -- label i really like is -- what is that men's club? >> the jackets with -- >> no, members only.

>> members only. >> see, i would buy those because to have something, yes, a member of something. the 40-year-old virgin. yeah, a girl sees you something that says members only. it's like you're a member somewhere that no one else is. >> fedex is planning to cut costs at its express air freight and services division hoping to add 1.7 billion to the bottom line over a four-year period. >> okay. >> you had a member. you had one at one point, didn't you? >> i remember having a members only bag. >> do you have one? >> like a murse? >> no, like a suitcase. >> like a male bag? >> like a fanny pack. >> you didn't say fanny pack. >> i didn't have one, but was trying to be funny and wasn't. coming up, how a china slowdown is trying to affect your portfolio. find out the names and exposures

whether they're a buy, sell, or hold. and mitt romney putting a new emphasis on counties that voted for president obama in 2008. will the move help him win the white house? romney supporter and new york jets owner woody johnson's going to join us to talk business, politics, help with some football. "squawk box" is coming back after this. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it.

welcome back, everybody, the

world bank says china's growth is slowing to an 11-year low. how this will impact companies exposed to china and their stocks. joining is john blank. and john, thanks for being with us this morning. >> thanks, becky. glad to be here. >> we've heard not only from the world bank, but the imf and a number of companies, alcoa being the most recent last night about how they are seeing a bit of slowdown in china's growth. we're not talking about things falling off a cliff. i think in alcoa's case, they went from 7% increase demand in aluminum down to 6%. 6%'s pretty strong, but what do you see happening on the ground in china? >> well, i think, you know, you've got to take the world bank and imf numbers over a multi-year period to get the picture. it was an 8.5% number that went to 7.8% this year. so what i think is happening here is we're seeing the back end of the stimulus that they

put in place two or three years ago, and what happened is they basically oversupplied. they were trying to oversupply at that time. but now they've got to reel some of that back in. and that overcapacity hit 2012 numbers. >> what does that mean? >> but longer term. >> go ahead, sorry. >> go ahead. >> it's okay. >> with longer term, there's no problem in my mind they can reach a 7% number for the next five years. >> what does this mean for the big national companies, maybe some of the u.s.-based companies. which companies is it a problem for? and which ones are you most concerned about? >> the ones i'm concerned about in the metal space or the steel production space. those types of companies are really the types of companies that are in the space where there's overcapacity in china and falling prices. so if they can't sell the volume into china, they're going to be at least influenced by the declining prices in those sectors.

so anybody with a zinc, ni nick aluminum, steel -- i think al koe's the better example where they're 6% where they used to do an 8% or 9%. >> companies selling to consumers in china, you think they'll be okay? >> oh, absolutely. one of the companies i think is really interesting to talk about is lululemon which is a vancouver based yoga maker. and they make their products all over asia. and they're a strong buy right now. what you see here is a good example of what's going on with a consumer-based company in this china slowdown. they get -- cotton prices that have fallen quite dramatically over the last couple of years because of the slowdown. and that's helping them. they have their labor costs, a lot of the production over in china and other parts of asia. then on the other end of it, people staying out of chinese stocks. that's causing domestic large cap stocks in the united states

to rise and actually be somewhat priced. so now you've got a situation where the stock market of the united states in places like canada are rising, and you've got your costs that are falling, the stock price rises, that creates more consumption, more activity in your stores, and your costs are falling. so apparel actually is actually doing quite well and is a fairly highly dax ranked industry right now. >> you'd also include companies like nike and adidas in the same ranking? >> yeah, absolutely. adidas is another number one ranked stock and experiencing the same kind of effect where you've got the benefit coming out of the chinese yuan being held back a bit, out of the lower wage cost and out of the falling production costs. and that's really what is the other side of what the chinese are trying to achieve here. i mean, you've got to look at it, becky, and think why are they slowing? because they're really doing it for a reason. and what they want to do is transition their economy into higher value activities.

but they know they can't do that over night. so what they don't want to do is lose like the apparel industry, which is $250 billion industry for them. they don't want to lose that. so what they're doing is they're slowing down production, which lowers the rise of costs and keeps them competitive and keeps their positions in place. so i think they're really smart here. they know what they need to do, but they know they can't do that overnight. >> let's talk about some other companies. gm's buick brand, we don't hear that over here. i know it is the hot car in china. how does that play out for gm? and what kind of impact does that have for gm shares? >> oh, absolutely. i think they're a great example. they've got the right brand, the chinese like american brands versus asian brands. and gm growing a share of that market right now. >> they don't like japanese brands right now. >> yeah, japanese brands, forget japanese brands, which only benefits gm all the more, right? >> right. another company yum that came out with their earnings last

night and they've got kfc is the big brand there, maybe some pizza hut too. those type of low-cost expenditur expenditures, you think more and more chinese consumers are going to be able to step up and take advantage of? >> absolutely. i mean if you look at the purchasi purchasing parity it's about 1,200 in teu.s. terms, that's a $800 they're throwing in consumer spending every year. you get the discounted restaurant chains, something that can diversify the offerings in china, and that one works. and they actually upped their store count they're putting in place in the next year in that earnings release. >> okay. well, john, we want to thank you for your time today, it's been a pleasure speaking with you. >> thanks, becky. >> take care. coming up next, politics and the business of football colliding. we're very happy to have him. woody johnson, supporter of mitt romney and owner of the new york

jets going to tackle the issues that matter most to your money. "squawk box" is back with woody and a lot more in two minutes. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty. here's your "honk if you had an affair with taylor" yard sign. looks good.

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he is the owner of the new york jets. ahead of a winning season for

his football team. woody johnson will join us onset to talk politics, the economy, and the jets' struggling offense. and our what's working series continues with another top fund manager, he will share his best investment ideas. the third hour of "squawk box" starts right now. welcome back to "squawk box" on cnbc, first in business worldwide. i'm joe kernan along with becky quick and ross sorkin. president of the lefrak organization. coming up in a couple of minutes, we're going to talk to new york jets owner woody johnson about the presidential election and his football -- woody, you can see, it says it in the teleprompter. and his season, his football team's slow start to the season.

those are not my words. those are -- yeah. >> when you -- do you remember when you said you'd rather have romney win and maybe the jets win? >> i didn't say it exactly that way. >> you see what's happening now. be careful what you wish for. >> i know. you wish for both. >> when all of a sudden romney turned around and, anyway. >> that's right. that was because of that. >> yeah. we're going to continue with our what's working series with dan fuss, with the total analyzed return above 10% since the fund launched back in 1991. but first, andrew. andrew, you have the morning headline. >> i do have the morning headlines. let's talk about them. alcoa reporting better than expected earnings in revenue after the close. the company earned 3 cents per share for the third quarter. that compares to expectations o of a break even quarter. among the catalyst, stronger demand for aluminum products from airplane and automobile producers, this did, though, offset weak aluminum prices and

china's slumping economy and that has a lot of people concerned. cautioning that the company's noticed a slight slowdown in some regions and end markets namely in china. so it's lowering its global demand forecast. and yum's earnings also beating the street revenues roughly in line. the company's raising its full-year outlook after sales in china held up despite cooling economic growth and that market share's rising on the news after the bell. and early yer this morning, costco is out with its results, the earnings and sales both beating estimates. and china's central bank governor and finance minister won't be attending the annual meetings in tokyo this week. some people are calling it a snub to japan and comes as the two countries remain at odds over a cluster of tiny islands. scheduled to give the closing speech on sunday. the dispute over the uninhabited islands in the east china sea has triggered widespread protest in recent weeks and having an economic impact, as well, with sales of japanese cars in china

plunging. the spillover effect is threatening a shaky economic recovery in japan after last year's tsunami and nuclear disasters. and we've got news on the proposed $45 billion merger between eads and bae. the two were reportedly not asked for an extension to those talks which would suggest the deal now might not happen. it won't happen. >> yeah, never mind. they only have until noon. >> it's all off. game is over. >> game over, man. >> yeah. bill paxton from "aliens." >> that's it, man, it's over, man. >> you have that on file? >> it's a good one, john. you need that at your fingertips. one more time. >> that's it, man, game over man, game over. >> that's when there's like 20 of them on the ship. and it really is game over on that ship because they all get eaten. let's get a quick check on the markets before the game does

come on. dow looks like the nasdaq up margin marginally. you're going to see the japan nikkei off 3%, korea also down 1.5%, hang seng down marginally. not much to say about the cac ftse 100. >> i'd say it's flat lining at this point. >> the guy from -- the aliens more important than that. the guy, he's lost it, and you can't -- >> that's it, man. came over, man. >> he lost it. he's panicked. and the guy from terminator. the guy -- >> coming down. >> our guest, new york jets owner woody johnson. as joe was talking about, would

you rather have a winning season for the jets or for mitt romney to win? and you said -- >> i said country first. >> but probably i would have characterized it saying that i, you know, great passion i've devoted my life to both of those things. and i will point out, i don't know if it's a coincidence or not, but right after romney had a debate and did extremely well as we all know. >> taking one for the team. >> yeah. >> yeah. patriot. patriot. >> thank you. >> obviously the polls have shown a real resurgence for romney. but even the romney campaign is saying you can't look at this momentum and assume anything or take anything for granted on this. you do have the vice presidential debate coming up tomorrow night. what would you like to hear from biden? what do you expect to hear from paul ryan? >> i'd like to hear from biden, i'm not sure. >> biden being biden. but biden's a very skillful

debater. >> here we go. >> he's a survivor. >> wait a minute -- that's preceded by idiot -- >> those are your words. >> he's been in the senate. both he and ryan have been, i think, five or six terms each. >> ryan in the house. >> right. >> he's in the house. but they've both had the same experience in terms of election. but 40 years of debating putting biden in somewhat of the driver's seat because of that. just because of his experience. >> we haven't seen him in five months on a tv network. on a national network. has not been an interview in five months. the last time he was on, he came out in favor of gay marriage and then the president had to -- >> he's saving himself. >> and there hasn't been a press briefing. a white house press briefing in 15 days because those can be on video.

the gaggles you can't videotape and it's only people that are traveling with the president. credential guys can get into the other one, and there hasn't been one in 15 days. >> amazing. >> you wouldn't want to talk about anything in the last 15 days. >> exactly. talking about big bird and all that kind of stuff. but nothing about jobs and the economy really has come out of the white house. >> do you expect -- the debate last time around caught people by surprise i would say on both sides of the aisle. >> right. >> this time you do have calls for people saying this needs to be a real argument about numbers. it needs to go back and forth on that. how do you expect to see this set up? >> for the v.p.? >> yeah, for the v.p. not focused on foreign or domestic. this is all over the map. >> i agree. i think it will be -- i would think it would be about, not just about numbers. it'll be about concepts. i think it's the two ways we can go. the fork in the road so to speak that romney talked about. you know, you can go big government or trusting the

individual. the way romney's going. and more emphasis on the individual and small and medium-sized companies. if you want to hear the problem we have with employment, that's really the only way to go. you've got to get small and medium-size business hiring and hiring vigorously and being very optimistic about the future of their businesses. >> i'm fascinated not about tomorrow's debate, but the next debate where the president is -- >> yeah, he's going to have to both be more aggressive, but also to maintain the presidential aura that the incumbent has. and that's tough to do both, i think. and i'm wondering now, does he just go right to 47%? right to tax returns? right to the same old, same old? >> does he argue numbers? >> doesn't he have to do policy? >> i think you probably have to go to numbers because that's why romney -- >> he should bring some of his numbers instead of just talking about the 5 trillion. >> i don't know what numbers he

has. if i were the president, i would get away from numbers. >> other than raising taxes on the high end, what is -- what is the vision for the next four years other than raising taxes? >> what he's been talking about in ohio over the last day or two, the car companies, going back to the auto companies going back saying, romney was opposed to that, this works. >> romney wasn't opposed to that at all. >> he was not in favor -- he was in favor -- >> of bailing out the unions and doing it in that particular method, but he wasn't opposed to bailing out the car companies. >> the question was if they went into bankruptcy, would there have been dips financing that would've come through? >> i think he feels there was -- that was the way to go, that kind of bankruptcy was the way to go and for the government -- for the president to pick a certain method, it's crony capitalism at the finest really what it is. it's a form of the government saying that you win and you lose. the shareholders loses.

>> was there financing available? was the government going to step in? and if the government wasn't going to step in, how do you handle it? >> i think he comes from a car business. his father was the chairman of general -- american motors. he understands this business, he has an affinity for people who work in these plants and who live in detroit and live in michigan. >> right. he's totally pro employee. >> steve rattner on the show and others. and i know he's aligned with the president, but there is a view or was a view at the time that the financing, as becky said, wasn't available. >> well, i don't know about that. >> well, i think that the crux has to be where this job comes from. they come from small and medium-sized business. small and medium-size business is confused today by lots of this talk. it is. and unfortunately, if they get into lots of specifics in the

debate, they're going to confuse more people because people don't understand some of the fine points that maybe come with those numbers. i think average businessman is saying i have a little capital, okay. do i expand or don't i expand? well, if he's being told my taxes are going up, maybe he says i don't expand. if he says if i hire somebody and i have to now pay for more health care, he says, well, maybe i don't expand. this all has to be clarified. and i hope when mitt does the debate, he's very clear on that because he was very clear at the last debate about it. >> i think he will be. and you're right, richard, absolutely right. it's a confident leader. suspend your capital, small and medium-sized businesses are mortgaging their lives. >> the left -- chris matthews across the board said where was the 47% number?

where was the tax return stuff, where was the bain outsourcing? that's the stuff they wanted to hear. does the president -- are those what define romney and give him so much success in terms of defining him and give him success in the poll numbers? do you return to that? or do you as the president say, no, here's my vision for the next four years. here's how i'm going to get jobs, do with entitlement, he's going to do -- >> he might go the 47%. >> that looks unpresidential. >> it does. but if he doesn't give any of us a vision, especially the medium and small companies. a vision of what's going to happen. you know, he's cooked. i think. >> all right. woody's going to be staying with us through the next commercial break. we'll continue the conversation in a moment with woody and richard. and also, coming up in the next half hour, we're going to continue our what's working series this week. we have the portfolio manager at

lumus sales. he focuses on bonds. he's got an incredible performance over the last few years. by the way, the presidential race is dominating the headlines, but the balance of power is also up for grabs in the november election. that could have a big impact on the market, as well. eamon javers will bring you a cheat seat on the senate renovations. what it means for your money. oo. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade.

welcome back, everybody. bae and eads have now confirmed their proposed $45 billion merger is off. the two sides needed to have three governments. france, britain and germany sign off on that deal. france and britain were said to agree on terms, but germany reportedly remains opposed. all three governments would've held shares in that company, but the deal is off officially at this point. and toyota's recalling almost 7 1/2 million vehicles in the united states, japan, and europe because of faulty power window switches. by the way, that's other areas too. the recall effects more than a dozen models that were produced through 2005 all the way through 2010. the power window switch on the driver side apparently didn't

have enough greece applied evenly during the production, that can cause friction and the switch, and sometimes cause smoke too, which obviously could be pretty concerning. no crashes or injuries have been reported, though. models in north carolina recalled include the yaris, carolla, rav 4, and scion models xb and xd. >> that sounds like the toyotas from the '70s where you put the window up and -- yeah. whether there'd be smoke coming up when you use the electric. that's like the old toyotas. let's resume our conversation with woody johnson here with us on the set. before we get to the jets, one more question on the campaign. you've done a lot to help raise money for mitt romney. we saw that the president somewhat surprisingly raise d $180 million in a month. i haven't seen romney's numbers, i wonder if you can comment on -- >> i don't know what they are

either, but that was a convention bounce. >> you could fund big bird and pbs for like ten years with $180 million. >> 20 years. >> 20 years. >> hey, the republicans are matching fund raising. there's a lot of money. >> if you're worried about pbs, $180 million, you can fund big bird if they're that worried about big bird. >> i think the american people are not worried about it and children's television network is ejecting to, you know -- >> it's not big bird you're worried about? >> no, big bird could go commercial if he wanted to go commercial. >> nickelodeon, you could make millions. it should be in the private sector theoretically. but there are other things, obviously, that wouldn't do, as well, and that's obviously the concern. >> okay. so now the, you're two and three. >> two and three.

that's right. >> yeah. >> and then you've got a tough -- we saw what happened o to, you know, this luck guy is pretty good, i think. how is this next game looking? >> how does the next game look? >> yeah. >> luck is a very, very accomplished -- pretty good quarterback for being a rookie coming on doing what he did to green bay last week. so, yeah. he has to take the colts very, very seriously. and we are -- we take every team seriously, and we're preparing like we always do. >> rex ryan -- off camera you were talking about some of the unfortunate things that happen to mark sanchez with some passes. >> yeah. he had some open receivers, but that one -- >> the one to cromartie, right? >> yeah, that was a good pass, just barely out of bounds. >> yeah, just barely out of bounds. yeah, he had some dropped balls. he had some tip passes. >> why do his tip passes seem to get tipped so much?

>> well, i think that was probably the defensive end that got his passes last week. the defensive, probably the defensive player of the year. we should've done a better job of accounting for the year and just don't throw in that area or throw extremely high. 6'6", and he can jump 30 inches. he's probably 15 feet. and he tipped one that would have been a touchdown and normally there's probably only two or three players in the league that could've made that play, the defensive play. >> he played pretty well. but, 48% and he's under 50% and completions and then 31st in the league or something. for quarterback rating, is there any slightest wavering in either you or rex ryan in terms of whether to just try to start tebow season? >> no. >> no. >> there will never be no matter what? >> never is a long, long time period.

but i see the same things in mark sanchez that i saw when i first met him. he's still a young quarterback. this is a very, very -- probably the most difficult position athletically and mentally that there is in all of sports. everybody's trying to deceive you and -- >> yeah. the running game. >> and the other guys trying to get at you. and it's a hurried environment. >> but sometimes what might motivate someone if they thought that you were thinking about it. you just want to bolster his confidence. >> no, not bolstering his confidence. we think he's that good. he is that good. i wouldn't look at the numbers too seriously, 31 or 28. a quarterback's job ultimately is to win games. and mark sanchez has proven he can do that. and he can -- like he pulled out a game a few weeks ago at the last couple of minutes and played miami. that was an ugly game. >> you think the jets can beat some of the best teams in the

league? >> i think we were very competitive in the last game. >> we were in there all the way to the end, we made some, a little few mistakes and that cost the game. >> -- tebow next year too? >> yeah, absolutely. he'll be with us for three years. and i think he's going to have -- he's going to be a real asset in helping us win games. >> do you know? is he still a virgin? >> i don't really go into that. >> just, you know, inquiring minds want to know. >> inquiring minds want to know. >> no, i don't know. i know the ladies in the make-up room really like him. >> i think you're the same color as my dress. >> i do like that tie. and if -- >> thank you. >> if you sent me one, i would wear it. >> what do you think? >> thank you. >> good luck.

i don't mean good andrew luck, i mean good luck. guys, coming up, a "squawk" trivia question. 22% of cars and trucks built for the 2012 model year are painted what color? good question, actually. we're going to tell you the most popular new colors right after this. what do you say, joe? >> most popular color, blue. >> beck cbecky? >>. >> silver. >> we'll tell you the answer when we come back. and at the bottom of the hour, the best investment ideas for your portfolio are what's working series continues. a strong track record of buying the debt of undervalued companies. th 8 airbags, a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.

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welcome back to "squawk box," everybody. the question we asked you, what color is your dream car? there's a new report that finds the top vehicle color choices this year. white or silver? white are rental cars, right? >> yeah. >> silver was a close second, it came in at 20%. black was in third place with 19%. gray and red, they round out the top five. no blue. >> white is -- >> i like blue. >> the population in the south and southwest, you can have -- when the sun shines, you can

have a white car. >> when i go to rental places, i always get a white car. >> i don't think they couldn't sell. men don't order -- i don't think you would order a white car. although it reflects -- it's not as hot inside. >> yeah, but you have a silver car. >> i do. but when you get a zip car, do you care what color they give you? >> i don't know. >> you don't care? >> i don't know. >> you have a black escalade. >> you are a black car guy. >> he is. he's a black car guy like you. you took a car here? >> i took a car. >> he has a helicopter. >> i don't have a helicopter. >> you could get one. >> maybe. >> you could borrow one. >> well i definitely could have borrow one. anyone who has one is willing to lend it for an hour. >> when we come back, we'll continue our what's working series. dan fuss is a portfolio manager at loomis sales. his bond fund has had a return

of 10.25% since it launched back to 1991. he will give us his best investing ideas right after this. maybe new buildings? what about updated equipment? they can help, but recent research shows... ...nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this.

welcome back to "squawk box," let's look at stocks to watch. cooper industries are selling their joint venture, apex tool group to bain capital to $1.6 billion. apex makes hand tools for the sears craftsman brand. also crescent wrenches and lufkin measuring tapes. and i was thinking, andrew, we could have -- who's more handy around all this, i think it would be a race to the bottom. >> to the bottom. >> yeah. we should do it some time. other things, i don't know, but are you handy at all? >> very not -- >> no. >> whenever i try to do anything, there's a band-aid involved or something happens typically. >> how many people will be let go by bain? since they've bought it, they must have fired everybody, isn't that what happened? .

>> that's happening at noon, they just announced it at 8:00. >> i was just joking. >> fedex has cut costs at the expressed air freight and services division. hoping to improve profits by $1.7 billion over the next four years, the move follows a cut in fedex's yearly profit forecast. and that came out last month. and monster beverage has been downgraded from hold to buy at steiffel nicholas. do they make anything? >> energy drinks, like red bull. >> it's got that green. >> you know who was advertising all through the ryder cup? you know, the energy drink. >> right. five hour energy? >> yeah. >> furyk. unfortunately he looked like maybe he had a little bit too much -- >> too much caffeine? >> did he not have too much? they stopped running those ads right after. they did, it was like, jim, lay off the red bull.

>> maybe he should've had prozac instead. >> we haven't talked real estate yet. >> nope. >> we were talking about all these people in paris who were giving up and trying to buy stuff here. how much of real estate markets being impacted in new york? >> quite a bit. and a lot of, let's say headline residential sales where people are spending $50 million for condos. most of that is foreign business. it's an interesting phenomenon because it really represents looking at that real estate as if it were a safe haven. >> right. >> money as opposed to the utility of living in the premises. >> do you think this sort of $20 million and up market stays? meaning, it's a moneymaker, not a money loser long-term?

>> well, i think people are using it as a substitute for gold. i think they're saying, okay, well, i can own some gold or i can own some real estate in new york. if you're not sure about, you know, kind of forgetting any clarity about really your status and your own country. it's a place to park money and that's what they're doing. i don't think they're looking at it as having a big uptake. i think they're looking at a gold deposit or something. >> back to reality, though. >> for the folks. >> for the folks, what's happening? >> well, the residential market in the united states, house market is doing a little better. you know, it's very low -- zblb not as fast as you thought. >> not as fast as anybody thought. it was being stimulated by the very low interest rates, qe-3, qe forever. >> right. >> and the multifamily market as an investment has continued to soar, it's been great. occupancy and rents and

multi-family buildings around the country have -- >> rents are out of control. >> rents are out of control. rents are out of control in new york. but rents are up almost across the board. >> how long does the rental situation in manhattan last? what's the turning point? >> the turning point is when people more comfortable buying and more supply comes on the market. >> when you think more supply, in manhattan, there's not a lot of supply. >> right now, right now we have institution, you know, brooklyn has been turned into a very acceptable alternative water front in jersey city, hoboken, that's been turned into an acceptable alternative. people being more expansive about what they're willing to accept. and neighborhoods in manhattan are being opened up, as well. i mean, the lower east side, other places that people never would've considered years ago now are cool. there's plenty of options available. and so, but they're going to be continued pressure on rents as long as high-paying jobs are in

new york. if there's a reversal in the financial service industry that's severe, you'll see that whole situation change. >> right. >> that was something that i always expected, though. we just heard that bonuses on wall street are going to be up this year or compensation more broadly will be up. but given all the things we've heard about regulation and what not, did you expect it was going to openly impact real estate? >> i did. i think it's impacting commercial real estate a little bit more than it has residential. >> right. warren buffett said famously a year ago, he said he thought the greatest investment would be a buy of the single family homes? >> i think it was november of last year. >> okay. and i think at the time we talked to you about that and you thought that was a good idea. still a good idea? >> no, i think it's a good idea for an individual to buy in the community that they understand or in a small group as an investment. i'm not clear that a fund

manager can go out and buy 10,000 homes and manage it. >> and there are a number of fund managers out there trying to do that. >> yes, several fund managers trying to do that. and i wish them -- >> are you giving them any money? >> i don't give anybody any money in real estate. i give it to myself. i don't need that as an option. but, i mean, the thesis is if you can sit on the home for long enough the prices should rise and i think that's correct. the problem with owning a single-family home, there's a lot of maintenance associated with it. that's why it's a complicated problem to solve. >> okay. >> richard lefrak, thank you, you're sticking around. appreciate it very much. coming up, the presidential race getting the most of the attention this election. but the balance of power in the senate is up for grabs, as well. cnbc's eamon javers joining us next with a tongue twister. a senate seat cheat sheet. man, that's close. and senate seat cheat sheet.

senate seat cheat sheet. >> say flu shots ten times. >> flu shots. and don't miss "squawk box" on friday. our guest host ron baron, live from the investment conference and we'll have a special guest steve wynn. i can't wait for that. david rubenstein and the chairman and ceo of underarmour. >> kevin.

welcome back to "squawk box," everyone. in our headlines this morning, h & r block announcing it's exploring strategic alternatives. that move could result in the company no longer being regulated by the fed as a savings and loan holding company. in a press release, the company cites the fed's proposed rules that would require higher requirements on s & ls. >> in the balance of power in the senate will be decided in the november election. joining us now with the rundown of the races to watch, cnbc's eamon javers. almost as much fun, eamon, especially with akin. he's tied again. people are coming back to him. now, he has a shot? >> it's very close. i'll give you the exact average here in the hit. but let me start off by sort of resetting where we stand so everybody knows in case you forgot. the balance of power in the senate now is 53% to 47%. so republicans have got a ways

to go to get to the 51 votes in the senate. there are 11 toss-up races around the country right now. and some of these races are being fought in areas that are not presidential battleground states. and that means these races kind of exist out there on their own and they're not as much affected by what's going on at the presidential level as you might think. let me bring you to, though, that everyone is going to be focusing on starting with massachusetts. that's elizabeth warren versus senator scott brown. he's the republican incumbent. brown, of course, elected in 2010 to senator kennedy's former seat. he was a conservative darling, emerged as a moderate republican in that campaign. warren is a key player in creating the consumer financial protection bureau. and there's been controversy over her claimed heritage as a native american in some academic job applications over her career. that one is tied very, very close right now, real clear politics average, about 1.7% advantage for elizabeth warren. now look at memoissouri, going

be closely fought again. this is senator claire mccaskill. the clear politics in this one is about 2.3% for mccaskill. these the first worm elected to the senate in missouri. there was a woman appointed before her. but the first woman elected, and she's running against todd akin and obviously as you say, joe, there was a controversy over the legitimate rape comments he made earlier in the summer. the republican establishment walked away from akin, refusing to fund him but this race is tight. and there are some republicans on board with akin in this hope he can win and that's going to affect that outcome. remember, 53%, 47% clo, close i senate. the race at the presidential election is tightening up. a whole lot of moving parts.

>> 26 now for republicans taking control of the senate. and it was at 80 for a long time, eamon, things went sour. and it's -- at the same time, with president obama's improving chances, this went the opposite way. >> yeah, what's interesting here, the conventional wisdom people expect a status quo election. they expect the democrats will maintain the senate. they expect that republicans will maintain the house. but it's tightening and that could go in any direction. >> did you mention ohio? >> i did not. >> that's tightened up too. >> last i saw was five points. >> and watch -- >> ten previous. >> and watch what's going on at the presidential level. because that is important even though these aren't battleground states. i looked up the spread yesterday. if you look at the 2008 election, mid-september is where obama started to really separate from john mccain. and the graph just goes away. he starts running away with it right in mid-september.

the graph this year if you look at the daily tracking polls goes the exact opposite way for obama. he was -- he had a pretty wide separation with romney and now it's completely converging. and that is a real problem for the obama campaign going in to november. obviously some real angst among democrats in this town thinking this thing might be going south on this thing. >> eamon, for the first time, the real clear politics average for the national, for the presidential race, there'd been atie at one point that moved to plus .7% for romney and it was five points three weeks ago. five points for obama three weeks ago. real quick -- i think rasmussen comes in at 130. >> and huge stakes for the vice presidential debate. >> let's say he didn't show, biden, is that possible? just to not show up? >> it is. it is possible. and then with joe biden, of course, it's always possible to

have some kind of massive gaffe that could really change the race. >> yeah. >> there's a lot at stake here. and, of course, the romney campaign emphasizing that paul ryan is a guy who hasn't had a debate, maybe since high school. so he's debating against joe biden. >> debated -- we've tried to debate ryan here and we've seen him debate with other people, and he's -- i don't know. >> eamon, what about ohio, though? we've talked with chuck todd about this. he sees a way to win without ohio. but basically have to win eight or nine other states. so it's a much more complicated road to the white house if you don't win ohio. so he had said -- he told us a week or two ago that romney would have to make a decision as to whether the pull out of ohio and go for the other states. >> on a couple of polls. >> yeah, it's off the table at this point. >> that's got to be off the table right now. ohio is the linchpin for everything in this campaign. that's why the president was there yesterday. you saw the president leading in

o-h-i-o cheer. he needs the college kids to come through for him. he needs the urban cities in ohio to turn out with big, big numbers. otherwise this thing gets very tricky for the president. >> yesterday, eamon, cnn opinion research had obama up four in ohio. but another poll, arg had romney up one. there's a new poll out today, came out today, survey usa has obama up one, 45% to 44% in ohio. >> i guess it depends on how many democrats you poll and how many republicans. >> that's true too. >> and that's why the debate is so important. because that deals with the energy and enthusiasm of your political base and that gets the turnout. if democrats are feeling muted and down beat after the debate, they might not be as fired out to go out and get their friends and rent a van and go to the polling place. the same thing with the republicans on the flip side. the enthusiasm and turnout on

the base is going to matter in ohio. >> eamon, thank you. >> you bet. >> okay. are you a nationals fan? >> i'm -- i'm not. i'm not a baseball guy. so, but they're having a good year down here and redskins are doing all right too. >> yeah, that's true. a programming note, cnbc's coverage of the vice presidential debate starts tomorrow at 7:00 p.m. eastern time. are you part of this? >> i am. carl and i are doing that. >> and lefrak is now in andrew's seat? he left to do that pilates class? >> he was attending nursery school. >> oh, okay. >> because there are some pilates classes that i want to do. because it starts at quarter of 9:00 -- >> what is pilates -- >> it's about your core. >> well, i hope it's worth it and he feels better afterwards. >> mean, mean, mean. >> why is that mean?

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welcome back. let's get down to the new york stock exchange. we have jim and david joining us right now and guys, you have to be watching a lot of the news that's been coming out. yum talking about china slowing in some of the outlook there, not bad news necessarily but alcoa saying the same thing, seems like a drumbeat from all of the companies that operate in china. >> i thought that yum is better than i thought it was in china, they didn't see the slowing. alcoa was strong about the idea the first quarter in china is stronger. i came away thinking nike's problems had to do with local retailers and price cutting. yum! has not seen the slowdown i thought they would. china's going nowhere and really bad, i didn't see it last night. the only one i did see that was disappointing was cummins truck

being down, because frac something down, not being drilled as much as before. >> we had an analyst that talked about that for the consumer plays it's not going to be a bad deal, lululemon and nike was mentioned as two of the stocks he liked. >> he was terrific, a total breath of fresh air. i'm buying residential property in my area because i know area and i'm getting very cheap money and i'm able to rent at high prices, i'm not allowed to own stocks, way to make money, he's dead right as always. >> richard, you talked about what it's meant recently for some of your returns, too. it's been huge. >> yeah, well just the multifamily business has been extraordinarily good the last few years because money is cheap and because there's less of people who went to rent houses or apartments so it's a good way to go. >> faber, are you liking investing in manhattan real estate? don't you wish we could talk

like these guys? >> i do. i do. i wish i could just get a mortgage, you know, that would be a really nice, a nice beginning i think, joe. >> on your dwelling. >> get a bank to loan me money and take it from there. >> in summit, jim or just around -- >> cobble hill, carol gardens, downtown brooklyn. i got people lined up to rent my apartments. there's some construction in brooklyn but as mr. lafrak knows you can't build like you build in this area and it comes down to good school districts, good elementary, good middle school, it's where people want to go. >> great restaurants, cobble hill. >> people want to rent. >> jim you should be loaded for people listening to what you say you should have gobs of money which you do. if you don't, why should we listen to you? >> i've been lucky and made a lot of money. >> you've been very good, jim. >> you have been very good obviously. >> you didn't mention the inn he

runs. >> my inn is filled, 17 people. i made really good rashers and poached eggs and fresh coffee for 17 people. i bring it to them by their table, take their orders. it's what i'm good at. i'm not good at lifting the bags. is the bag heavy, you take it. i've never gotten a tip, it's been two years. >> i don't know about this? >> it's on springfield avenue, called the debarry. michael hailey runs it with me and every sunday i serve bagels from bagels for you, you go there and it's a joy to meet real people and $179 a room and we are filled, filled, filled. >> all right. >> you know what -- >> wow. >> this is good. >> faber, how far do you swim, my last question, do you swim a mile? >> i swim more than that. >> you do. >> yeah, i swim between 2,000 and 2,500 yards. >> yards or meters? >> yards lately, i'm working at a 25-yard pool. >> i'm doing 12 -- >> i saw faber in the pool. >> he's at 12 -- i need one of

my ipods in the ears. >> keep it up, man, you look good. >> thank you, i've been looking at you, you looking at me. see you later. coming up, we've covered politics and real estate with our guest host richard lefrak. up next he's in andrew's seat and you say he went to a spinning class. >> that's his surrogate, not pilates, it's spinning. >> i'm sorry. >> tomorrow on "squawk box" we'll get you ready for the vice presidential debate, our guest host will be evercorps partners chairman roger altman. we'll talk strat know with reince priebus and former senator ted kaufman is prepping joe biden for the event. tdd#: 1-800-345-2550 let's talk about low-cost investing.

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for up to $360 a pair. i mean you get both -- >> i don't have any. >> you get both legs $180 a leg, at expensive boutiques. the company has been hit by falling sales and i've never seen you, but i bet you look pretty good in them jeans. >> i'm a he will vies guy. >> you are? >> yeah, i can't afford $360 for a pair. >> i'll do that mr. t bit sometime, look at dem jeans! >> richard, last word, with he throw a word out, word is election. >> fatigue. >> i'm with you. >> yeah, it's been a little too long and we need a resolution as quickly as possible. i'd like to get back to -- >> november 6. >> it seems like an eternity.